23% of all subprime auto loans are 90+ days delinquent. Why?

Auto loan and 

lease balances

set a new record

in 4Q 2019,

at $1.33 trillion. 

Seriously 

delinquent 

  ( 90+ days )

auto loans 

jumped to 

4.94% of the 

$1.33 trillion 

of total loans 

and leases 

outstanding.

4.94% may not

sound very high,

but 5.27% was 

the prior record.

Borrowers with 

prime credit rates

currently have 

low delinquency 

rates

But borrowers with 

subprime loans 

( credit score below 620 )

have their 

delinquencies

exploding.

That's in spite of

the very low 

unemployment, 

and over 10 years 

since the last

recession ended 

in June 2009 !

Combined, the

prime and subprime 

auto-loan delinquencies 

90 days or more past due 

in the fourth quarter 2019, 

were up +15.5% from 

fourth quarter 2018,

to a record $66 billion.

( New York Fed data )

About 22% of all the 

$1.33 trillion in auto loans

outstanding are subprime, 

so about $293 billion 

are subprime. 

$68 billion of 

subprimes

are 90+ days 

delinquent,

or about 23% ! 

Subprime auto loans 

are often packaged 

into asset-backed 

securities (ABS)

-- bonds sold to 

institutional investors, 

such as pension funds. 

These subprime 

auto-loan ABSs 

are now experiencing 

record high

delinquency rates. 

In January 2020, 

the subprime 

       60+ day 

delinquency rate,

for auto-loans

packaged in the 

ABS securities

rated by Fitch, 

rose to 5.83%, 

the highest rate 

for any January, 

and far higher than 

any delinquency rate 

during the Financial Crisis:

Meanwhile, note that

the prime auto loans 

( blue line in the chart ) 

have low delinquency rates.

High subprime 

delinquencies 

can't be due to 

job losses.

So those delinquencies 

must be due to very 

aggressive lending.

With the auto loans 

packaged as 

ABS bonds, 

sold to investors 

madly chasing yield. 

Aggressive lenders 

include Santander 

Consumer USA, 

Credit Acceptance 

Corporation, and 

many smaller 

private-equity 

subprime lenders, 

who specialize

in auto loans.

This won't take down 

the banking system.

But the subprime auto

loan data do tell us 

there are an unusual

percentage of people

who are NOT 

experiencing what

President Trump falsely

claims is the strongest

USA economy ever !

This will cost Trump

some votes in the

2020 election !